INTERNATIONAL. US coffee giant Starbucks has announced plans to open its first coffee shops in Russia in partnership with leading Kuwaiti retailer and Middle East franchisee MH Alshaya.
This Summer ten coffee shops will start operating in St Petersburg and Moscow, Bloomberg news agency reported. The franchisee for Russa will be MH Alshaya, the master franchisee for numerous leading brands such as Debenhams, The Body Shop, NEXT, Mothercare, River Island, BHS, H&M, Peacocks, MAC, Boots, Clinique and Starbucks and hospitality brands in the Middle East, Cyprus and Turkey. Last year its sales amounted to US$1.2 billion.
“We’ll start opening our first stores in Moscow and St Petersburg in August, then review expansion plans every six months,” Bloomberg cited Mohammed Alshaya, CEO of MH Alshaya, as saying.
At the end of the last year Jim Donald, Starbucks CEO, said the chain would add 2,400 stores worldwide in 2007. The firm’s target is to attain a total of 40,000 stores around the world.
And Russia presents “significant opportunities,” according to Starbucks Chairman Howard Schultz. Starbucks has opened its first coffee shops in Brazil and Egypt. By the Summer it will enter the Russian and Indian markets, Howard Schultz said.
At the moment Starbucks operates over 13,000 shops across the world. In the last quarter of 2006 Starbucks Corporation reported a net revenue of US$2.4 billion, an increase of 22%. Net earnings accounted for US$205 million, an increase of 18%. The company opened 728 stores during that period.
In Russia MH Alshaya is also Mothercare’s franchisee. The Kuwaiti company has spent US$40 million on acquisitions and new infrastructure in Russia.
"We know retail, and where we see an opportunity we’re prepared to take the risk for our partners by investing in expansion ourselves,” Bloomberg quoted Alshaya as saying.
A local market expert was positive about the prospects of Mothercare and Starbucks in Russia, though he noted that they have to take local conditions into account to be successful.
“Moscow, St. Petersburg and other Russian cities with populations over one million people have far fewer coffee shops than their Western counterparts,” Mikhail Podushko, Marketing Director at WorkLine Research, was quoted by St Petersburg Times as saying.
Despite high competition in St Petersburg’s centre, there is room for expansion in the suburbs, Podushko said. “The market has great potential. Besides, coffee shops are a convenient place for meeting. Their growing popularity is related to the lifestyle of the young,” he said.
“Starbucks obviously has a strong brand, the technology and financial resources. The question is: what type of coffee shop will they choose to launch. If they offer take-away coffee and no smoking zones, I seriously doubt that they will become popular. Having said that, for young people Starbucks is a legend,” Podushko said.